BAI Index June: Looking forward
Closing off with index prices coming off at the close of the month, May has been tumultuous for the airfreight market. Certainly, airfreight was a beneficiary of spillover from the heavily oversubscribed and congested global ocean freight markets as well as drawing from lower capacity ex-Hong Kong (which has since been resolved) because of quarantine procedures highly specific to Cathay Pacific. Airfreight has also benefitted from booming import demand. Meanwhile global capacity on the long-haul routes has alleviated slightly, however, not to the extent you might expect for intra-Europe/China/US passenger flying following a slow push out of global lockdowns.
China to Europe finished its third peak since February 2020 at the beginning of May, slowly coming off and now sitting down 12 cents to $4.41/kg (Hong Kong to Europe). The forward outlook again is quite sharply backwardated and bearish if only due to the heavily inflated current price, rather than any unusual weakness in the market. Although short of a trade war, rhetoric between European states and China has ramped up slightly over May (largely linked to European concerns for Xinjiang Province, China), this has not had any initial impact. Meanwhile, the impacts of Brexit have also been masked by the index, with much of the charter traffic moving freight across the English Channel because of congestion not really factoring in the full Asia-Europe trade price.
Looking ahead, forward prices will also be backwardated, however, US economic growth and a potential collision of low long-haul capacity and passenger flying, and the run-up to another Q4 peak might be bullish for prices in Q3/4.
On Asia to US we’ve seen the same stimulus-driven boom in import demand and spillover from ocean freight, compounded by capacity constraints lifting the Hong Kong to US spot prices well about the $12/kg mark. Index prices did track a positive change, but not to the extent seen in the underlying transacted price. Looking ahead, forward prices will also be backwardated, however, US economic growth and a potential collision of low long-haul capacity and passenger flying, and the run-up to another Q4 peak, might be bullish for prices in Q3/4.
Transatlantic prices have had a consistent story since March 2020, with prices highly rangebound between the $4.00-$4.60/kg mark (Frankfurt to North America) and largely in line with consistently low passenger travel. The big mover remains the opening up of European countries with the US (and vice versa) to harness what has been an explosion of passenger travel, using UK green list destinations and their dramatic gain in passenger traffic as a guide.
About Peter Stallion, Head of Air and Containers, Freight Investor Services
Peter Stallion heads up the Air and Container Freight desks at FFA brokerage Freight Investor Services. He started his career in air freight chartering, and has a passion for emerging risk management markets and the logistics industry.